Saudi Arabia, Russia sign oil pact amid global glut

Sep 06, 2016, 2:08 AM EDT

(Source: Wyatt Wellman/flickr)

Amid a global glut that has tanked petroleum prices, the world’s two largest producers of oil, Saudi Arabia and Russia, signed an oil-cooperation agreement on the sidelines of a Group of 20 summit on Monday. The two countries, which have been facing calls for an output freeze, however, stopped short of pledging the production limits.

Given the speculation over what the Saudi-Russia oil agreement may say, the oil prices registered a sharp rise of about five percent ahead of the announcement, reports The Wall Street Journal. However, the gains were offset within hours, as the pact resulted in no immediate action.

Analysts are skeptical that the new oil pact would not change anything on ground, writes Reuters. In April, a similar agreement fell apart after Saudi Arabia insisted that Iran, O.P.E.C.’s third-largest oil producer participate in output freeze. Iran has refused to slash down its oil output, as it seeks to recover market share lost during years of Western sanctions.

Price slump over the past two years has hit the economies of both big and small producers of oil. While Saudi Arabia and Russia face budget pressures, Venezuela and Nigeria have witnessed civil unrest fueled by economic pains.